VIRTUES OF BAD TIMES Interaction Between Productivity Growth and Economic Fluctuations
AbstractWe develop a model of optimal productivity growth underdemand fluctuations. We consider two alternative hypotheses. First,we assume that productivity growth is costly in terms of currentproduction. Second, we assume that the cost of productivityimprovements is independent of current production. It is shown that,in the first case, productivity improvements will be countercyclicalwhereas, in the second case, they will be procyclical. The model thenis used to study the impact of the frequency and amplitude offluctuations on long-run growth. The results corresponding to thefirst hypothesis are shown to be consistent with recent empiricalwork.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 2 (1998)
Issue (Month): 03 (September)
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